1st Colonial Bancorp, Inc. Reports First Quarter 2024 Net Income

1st Colonial Bancorp, Inc. (FCOB), holding company of 1^st Colonial Community Bank, today reported net income of $1.6 million, or $0.32 per diluted share, for the three months ended March 31, 2024, compared to net income of $1.5 million, or $0.31 per diluted share, for the three months ended March 31, 2023.

Robert White, President and Chief Executive Officer, commented, “We are pleased to report our first quarter results, which reflect our continued solid performance and overall resiliency in dealing with the challenging interest rate environment. Continued pressure on deposit rates has caused a decrease in our net interest margin. However, our focus on cost controls had a positive impact on our bottom line. We remain committed to delivering high quality, value added products and services to our clients.”

“Commercial loan demand has leveled off, as the rise in debt costs, coupled with an increase in operating costs due to persistent inflation, has caused many companies to re-evaluate growth plans and capital expenditures. In addition, we have made some organizational changes to support our sales efforts and to ensure that our sound credit discipline is maintained for new credits and our portfolio management practices. Our asset quality metrics improved as expected during the quarter, based on the successful resolution of two non-performing credits. We are and will continue to closely monitor and manage our operating costs to account for the anticipated and continuing pressure on our funding cost.”

“Our team remains committed to executing our strategic priorities and delivering exceptional products and services through multiple distribution channels to support the ongoing needs of our customers.”

Operating Results

Net Interest Income

Net interest income for the three months ended March 31, 2024 and 2023 was $6.3 million and $6.5 million, respectively. The $194 thousand decrease in net interest income was primarily attributable to a $1.6 million increase in interest paid on average interest-bearing liabilities that was partially offset by a $1.4 million increase in interest income earned on average interest-earning assets. For the first quarter of 2024, average loan balances increased $31.2 million to $635.3 million from $604.1 million for the first quarter of 2023. Average residential mortgages, home equity loans and lines, and commercial mortgages outstanding increased $39.8 million, $9.7 million, and $8.4 million, respectively. Average outstanding constructions loans, which have higher interest rates based on the Wall Street Journal (WSJ) prime rate, declined $23.7 million for the first quarter of 2024 compared to the same period in 2023. When compared to the fourth quarter of 2023, net interest income declined slightly by $4 thousand.

For the first quarter of 2024, interest expense was $4.2 million, an increase of $1.6 million, or 62%, from $2.6 million for the first quarter of 2023. For the first quarter of 2024, average interest-bearing deposits increased $31.6 million from the first quarter of 2023. Average brokered certificates of deposit (CDs) and interest checking accounts increased $42.6 million and $12.2 million respectively. Average savings and money market balances and retail CDs declined $22.0 million and $1.3 million, respectively. As a result of the prolonged higher interest rates, we have increased our deposit rates over the last year. The increase in deposit rates combined with the increase in the average balance of higher cost brokered CDs led to an increase of $1.7 million in deposit interest expense in the first quarter of 2024 compared to the first quarter of 2023. When compared to the fourth quarter of 2023, total interest expense increased $316 thousand from $3.9 million. The average rate paid on interest bearing liabilities was 2.61% for the first quarter of 2024 compared to 2.41% for the fourth quarter of 2023 and 1.67% for the first quarter of 2023.

The net interest margin was 3.31% for the first quarter of 2024 compared to 3.53% for the first quarter of 2023. The average yield on interest-earning assets grew 57 basis points from 4.94% for the quarter ended March 31, 2023 to 5.51% for the quarter ended March 31, 2024. The average yield on earning assets was positively impacted by $138 thousand in nonaccrual interest received from the resolution of a nonaccrual loan. The average rate paid on average interest-bearing liabilities increased 94 basis points from 1.67% for the first quarter of 2023 to 2.61% for the first quarter of 2024. When compared to the fourth quarter of 2023, the first quarter 2024 net interest margin grew three (3) basis points from 3.28% and was mainly related to the collection of the nonaccrual interest.

Provision for Credit Losses

For the three months ended March 31, 2024, the provision for credit losses was $155 thousand and included $120 thousand for loans and $35 thousand for off balance sheet (“OBS”) commitments, which are the Bank’s commitments to fund loans. For the three months ended March 31, 2023, the provision for credit losses was ($174) thousand and included ($197) thousand for loans and $23 thousand for OBS commitments. The 2024 provision for credit losses was due to new loan originations and an increase in OBS commitments. For the fourth quarter of 2023, the provision for credit losses was $148 thousand and included $95 thousand for loans and $53 thousand for OBS commitments. Net recoveries were $116 thousand for the first quarter of 2024 compared to $32 thousand for the first quarter of 2023.

Noninterest Income

Noninterest income for the first quarter of 2024 was $721 thousand, an increase of $267 thousand, or 59%, from $454 thousand for the first quarter of 2023. Income from the origination and sales of residential mortgages increased $253 thousand from $189 thousand for the first quarter in 2023 to $442 thousand for the first quarter in 2024. While mortgage originations were approximately the same, we sold 82% of the originations in the first quarter of 2024 compared to 46% in the first quarter of 2023.

When compared to the fourth quarter of 2023, noninterest income for the first quarter of 2024 grew $2 thousand from $719 thousand. Income from the origination and sales of residential mortgages grew $240 thousand, or 120%, from $202 thousand for the fourth quarter of 2023. There were no gains on the sale of SBA loans in the first quarter of 2024 compared to $244 thousand in gains on the sale of SBA loans for the fourth quarter of 2023.

Noninterest Expense

Noninterest expense was $4.8 million for the quarter ended March 31, 2024, and decreased $91 thousand, or 2%, from $4.9 million for the quarter ended March 31, 2023. Salaries and benefits decreased $285 thousand and were partially offset by increases in audit and legal expenses of $82 thousand and $59 thousand, respectively. The decrease in salaries and benefits was mainly related to the recognition of severance that was negotiated with a former executive in 2023. The increase in audit expenses was mostly related to optional targeted testing of operational areas and the increase in legal fees was related to the workout and disposition of nonaccrual assets.

When compared to the fourth quarter of 2023, noninterest expense for the first quarter of 2024 increased $532 thousand from $4.2 million. Salaries and benefits increased $434 thousand. The fourth quarter of 2023 included a downward adjustment to the targeted performance-based incentive compensation based on actual 2023 results. Additionally, the fourth quarter of 2023 included a $100 thousand recovery payment on a previously recognized fraud loss between a long-term customer and an unrelated third party.

Income Taxes

For the first quarter of 2024, income tax expense was $508 thousand compared to $726 thousand for the first quarter of 2023 and $497 thousand for the fourth quarter of 2023. During the first quarter of 2023, we surrendered a low yielding BOLI policy and reinvested the proceeds at a significantly higher yield. As a result of the surrender, we recorded $113 thousand in tax expense which included a 10% penalty. Additionally, the New Jersey corporate business surtax rate of 2.5% expired as of January 1, 2024 and contributed to the reduction in taxes for the first quarter of 2024.

Financial Condition

Assets

As of March 31, 2024, total assets were $818.1 million and declined $7.5 million, or 1%, from $825.6 million as of December 31, 2023.

Total loans were $637.2 million as of March 31, 2024 compared to $637.0 million as of December 31, 2023. During the first quarter, home equity loans and lines of credit and residential mortgages increased $10.5 million and $2.6 million, respectively. Commercial real estate loans and nonaccrual loans declined by $7.8 million and $3.3 million, respectively. Loans held for sale grew $1.9 million, or 52%, from $3.6 million as of December 31, 2023 to $5.5 million as of March 31, 2024.

Investments increased $3.9 million, or 4%, to $111.5 million as of March 31, 2024 from $107.6 million as of December 31, 2023. During the first quarter we purchased $5.0 million in U.S. government sponsored securities. The unrealized loss in the investment portfolio was $6.2 million as of March 31, 2024 and December 31, 2023. Cash and cash equivalents declined $12.1 million, or 23%, to $40.7 million as of March 31, 2024 compared to $52.7 million as of December 31, 2023.

Asset Quality

As of March 31, 2024, the allowance for credit losses (“ACL’) for loans was $9.9 million, or 1.56%, of total loans compared to $9.7 million, or 1.52%, of total loans as of December 31, 2023. Nonperforming assets as of March 31, 2024, were $1.6 million compared to $4.9 million as of December 31, 2023. During the first quarter of 2024, we were successful in the disposition of two nonaccrual loans totaling $3.3 million. One of the nonaccrual loans was a residential construction loan that became nonaccrual in the third quarter of 2020. The second nonaccrual loan was a commercial mortgage that became nonaccrual in the fourth quarter of 2023. The ACL to non-accrual loans was 631.5% as of March 31, 2024 compared to 199.0% as of December 31, 2023. As of March 31, 2024, the ratio of non-performing assets to total assets was 0.19% compared to 0.59% as of December 31, 2023.

Liabilities

Total deposits were $669.0 million as of March 31, 2024, and declined $18.5 million, or 3%, from $687.4 million as of December 31, 2023. Municipal and interest checking accounts declined $19.7 million and $9.4 million, respectively. Noninterest checking accounts grew $7.1 million. Brokered certificates of deposit increased $23.5 million to replace the $21.8 million decline in retail CDs. Short-term borrowings increased $9.1 million to supplement our funding requirements. Our uninsured and uncollateralized deposits are approximately 15% of total deposits.

Shareholder’s Equity

Total shareholders’ equity was $69.7 million as of March 31, 2024, compared to $67.9 million as of December 31, 2023. The accumulated comprehensive loss was $4.5 million as of March 31, 2024 and December 31, 2023. The accumulated comprehensive loss is related to the unrealized loss in our investment portfolio. Tangible book value per share increased $0.34, or 2%, from $14.31 as of December 31, 2023 to $14.65 as of March 31, 2024. As of March 31, 2024, the Bank’s capital ratios remain strong with a leverage ratio and a total risk-based capital ratio of 10.19% and 15.79%, respectively, compared to 10.02% and 15.55%, respectively, as of December 31, 2023.

Consolidated Financial Statements and Other Highlights:

1^st COLONIAL BANCORP, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited for March 31, 2024 and 2023, dollars in thousands, except per share data)

	For the three months ended
	Mar 31,			Dec 31,			Mar 31,
	2024			2023			2023
Interest income	$	10,500		$	10,222		$	9,079
Interest expense		4,203			3,921			2,588
Net Interest Income		6,297			6,301			6,491
Provision for credit losses		155			148			(174)
Net interest income after provision for credit losses		6,142			6,153			6,665
Non-interest income		721			719			454
Non-interest expense		4,773			4,241			4,864
Income before taxes		2,090			2,631			2,255
Income tax expense		508			497			726
Net Income	$	1,582		$	2,134		$	1,529
Earnings Per Share – Basic	$	0.33		$	0.45		$	0.33
Earnings Per Share – Diluted	$	0.32		$	0.44		$	0.31

SELECTED PERFORMANCE RATIOS:

	For the three months ended
	Mar 31,				Dec 31,				Mar 31,
		2024				2023				2023
Return on Average Assets		0.80	%			1.07	%			0.80	%
Return on Average Equity		9.23	%			13.05	%			10.49	%
Book value per share	$	14.65			$	14.31			$	13.01

		As of March 31, 2024		As of December 31, 2023
Bank Capital ratios:
Tier 1 Leverage		10.19%		10.02%
Total Risk Based Capital		15.79%		15.55%
Common Equity Tier 1		14.54%		14.30%

1^st COLONIAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS

(Unaudited for March 31, 2024, in thousands)	As of March 31, 2024			As of December 31, 2023
Cash and cash equivalents	$	40,658		$	52,727
Total investments		111,479			107,577
Mortgage loans held for sale		5,485			3,619
Total loans		637,177			637,037
Less ACL-loans		(9,926)			(9,690)
Loans, net		627,251			627,347
Bank owned life insurance		18,035			17,894
Premises and equipment, net		1,708			1,770
Accrued interest receivable		3,915			3,431
Other assets		9,587			11,279
Total Assets	$	818,118		$	825,644
Total deposits	$	668,959		$	687,444
Other borrowings		62,700			53,600
Subordinated debt		10,649			10,631
Other liabilities		6,145			6,046
Total Liabilities		748,453			757,721
Total Shareholders’ Equity		69,665			67,923
Total Liabilities and Shareholders’ Equity	$	818,118		$	825,644

1^st COLONIAL BANCORP, INC.
NET INTEREST INCOME AND MARGIN
(Unaudited, in thousands, except percentages)

		For the three months ended
		March 31, 2024									December 31, 2023									March 31, 2023
		Average Balance			Interest			Yield/ Rate			Average Balance			Interest			Yield/ Rate			Average Balance			Interest			Yield/ Rate
Cash and cash equivalents		$	14,298		$	146		3.94	%		$	16,998		$	190		4.44	%		$	8,840		$	63		2.89	%
Investment securities			111,182			806		2.91	%			104,993			692		2.61	%			127,843			659		2.09	%
Loans held for sale			4,746			75		6.39	%			4,972			80		6.36	%			5,025			48		3.87	%
Loans			635,318			9,473		6.00	%			635,694			9,260		5.78	%			604,088			8,309		5.58	%
Total interest-earning assets			766,174			10,500		5.51	%			762,657			10,222		5.32	%			745,796			9,079		4.94	%
Non-interest earning assets			27,760									26,273									27,616
Total average assets		$	793,934								$	788,930								$	773,412
Interest-bearing deposits
Interest checking accounts		$	373,812		$	1,413		1.52	%		$	389,736		$	1,456		1.48	%		$	361,598		$	900		1.01	%
Savings and money markets			64,296			273		1.71	%			62,030			229		1.46	%			86,247			208		0.98	%
Certificates of deposit			85,499			815		3.83	%			97,766			849		3.45	%			86,785			348		1.63	%
Brokered deposits			94,625			1,239		5.27	%			72,670			995		5.43	%			52,040			567		4.42	%
Total interest-bearing deposits			618,232			3,740		2.43	%			622,202			3,529		2.25	%			586,670			2,023		1.40	%
Borrowings			29,182			463		6.37	%			23,488			392		6.63	%			40,851			565		5.61	%
Total interest-bearing liabilities			647,414			4,203		2.61	%			645,690			3,921		2.41	%			627,521			2,588		1.67	%
Non-interest bearing deposits			71,677									71,021									80,488
Other liabilities			5,917									7,362									6,275
Total average liabilities			725,008									724,073									714,284
Shareholders' equity			68,926									64,857									59,128
Total average liabilities and equity		$	793,934								$	788,930								$	773,412
Net interest income					$	6,297								$	6,301								$	6,491
Net interest margin								3.31	%								3.28	%								3.53	%
Net interest spread								2.90	%								2.91	%								3.26	%

About 1^st Colonial Bancorp, Inc.

1st Colonial Bancorp, Inc, is a Pennsylvania corporation headquartered in Mount Laurel, New Jersey, and the parent company of 1st Colonial Community Bank (the “Bank”). The Bank provides a range of business and consumer financial services, placing emphasis on customer service and access to decision makers. Headquartered in Collingswood, New Jersey, the Bank has branches in Westville, New Jersey and Limerick, Pennsylvania. The bank also has administrative offices in Mount Laurel, New Jersey. To learn more, call [phone] or visit www.1stcolonial.com.

“Safe Harbor” Statement

In addition to historical information, this press release may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to 1st Colonial Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance, and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond 1st Colonial Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological factors, risks and uncertainties that could cause actual results to differ materially include, without limitation, the impact of the ongoing pandemic and government responses thereto; on the U.S. economy, including the markets in which we operate; actions that we and our customers take in response to these factors and the effects such actions have on our operations, products, services and customer relationships; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and the effects of inflation, a potential recession, among others, could cause 1st Colonial Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. 1st Colonial Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. 1st Colonial Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by 1st Colonial Bancorp, Inc. or by or on behalf of 1st Colonial Community Bank.

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